Home Depot service carrot: cash

Program offers monetary rewards to stores and workers

CHICAGO (MarketWatch) -- Money talks, and Home Depot Inc. is hoping that it will speak volumes to employees about improving customer service.

The nation's largest home-improvement retailer -- whose tag line is "You can do it. We can help" -- has set aside $30 million to pay monthly and quarterly rewards to employees and stores that score high marks on customer-service surveys.

It's an innovative, and some would say aggressive, way to hammer home to employees of the do-it-yourself retailer that they need to remember the "customer-first" rule.

The plan comes at a time when Home Depot is under shareholder scrutiny for high executive pay in the face of a slumping share price.

'[The plan] doesn't solve the basic, core problem of having knowledgeable people working in your stores. ... You can't just throw money out there if you don't have enough people on the floor to help the customer.'
George Whalin, Retail Management Consultants

In recent years, Home Depot's
HD, -1.69%
reputation for having crews of knowledgeable employees manning the floors has taken a bruising, while the opposite has occurred at its biggest rival, Lowe's Cos.
LOW, -1.63%

But industry experts question whether offering employees as much as $2,000 extra a month and $10,000 a quarter is enough to overcome what they say is a shortage of salespeople in the aisles. These staffers, recognizable by their orange Home Depot aprons, are charged with explaining the workings of, say, electrical boxes or piping, or describing how to put in a backyard patio.

"The problem [with the plan] is that it doesn't solve the basic, core problem of having knowledgeable people working in your stores," said George Whalin, founder of Retail Management Consultants. "In recent years, Home Depot has spent very little educating people."

Jose Lopez, Home Depot's chief customer officer, is hoping the plan, called Orange Juiced -- the first customer-incentive plan of its type -- will change all that. A three-tier measure that includes what he calls VOC, the voices of customers, as well as peer and management reviews, will determine which employees and stores are rewarded for the biggest improvements in customer service and for maintaining high levels of service.

'Juiced' to serve customers

On a quarterly basis, the best store can get up to $25,000 that the manager determines how best to spend, either by individual disbursements, a big award celebration or both.

"This is about providing excellent customer service," Lopez said. "We want to be juiced about serving our customers. I know it sounds a little corny, but trust me, it plays well. The response has been phenomenal."

The program began a week ago, and relies heavily on customer response through a survey and an toll-free number at the bottom of their receipts.

Home Depot logs about 250,000 customer input calls a month, according to Lopez, but the company believes that the three-tiered approach of using manager, peer and customer feedback is the most balanced method.

Though an employee could theoretically get his or her friends to buy a hammer on Monday, a drill bit Tuesday, a light bulb Wednesday and so forth to help skew the numbers, Lopez said that seems too tedious. Besides, he added: "We have ways of figuring those things out."

This program is different from one called Success Sharing launched in 2002, which gives employees and stores payouts based on sales performances.

Lopez said that the Orange Juiced program is distinct. "We want to ensure that we're sending out a strong message that we are working very diligently to reinvigorate our culture of service.

"We're after customer loyalty," he said. "Overall satisfaction translates into loyalty. We want to make sure that when people are having to make a decision about where to shop, they will cross over many lanes to come to us vs. anywhere else."

Uncommon, but 'critical'

Retail experts said that though many merchants have a number of incentive programs for employees, Orange Juiced is unusual.

"It's very uncommon to just throw incentives at delivering customer service," Retail Management's Whalin said. "I've never heard of anybody who does it that way."

Whalin recounted a recent Memorial Day experience at Home Depot, in which there were only three cashiers working during a busy period.

"That's the kind of issue you have to fix if you're going to have good customer service," he added. "You can't just throw money out there if you don't have enough people on the floor to help the customer."

Marshal Cohen, chief industry analyst for the NPD Group, said that the Orange Juiced plan is not "normal," but nevertheless "it's critical."

"Every retailer is really starting to pay attention to it now. Because if you don't, someone down the street will, and you'll lose your customers quickly," he commented.

Cohen recounted that during his most recent Home Depot trip, he stood at the paint counter for 21 minutes before someone helped him, even though there were two workers nearby worrying about scheduling and another stacking paint cans.

"It's easy to ignore the customer because no one's keeping track of that, but they are keeping track of whether the racks are stacked and all the other additional duties are completed," he said. "This is a very aggressive move for Home Depot."

Harry Friedman, founder of Friedman Group retail consultants, said that the plan was too subjective. "This is not going to solve a thing. Subjective approaches don't work over a period of time.

"The problem is that the operations are set up such that [the sales associates] get in more trouble for not remerchandising the shelves than they would for not going that extra mile with the customer," he elaborated.

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